U.S. Energy Policy Should Take a Lesson From Germany’s Energiewende

By Rainer Baake And Jennifer Morgan -
May 15, 2013

“Energiewende” may not be a household word in the United States today, but U.S. citizens and policymakers are likely to hear more about it. It’s the name of Germany's ambitious energy transformation, which aims to move the country to at least 80 percent of electricity from renewable energy sources by 2050.

Germany already gets nearly 25 percent of its electricity from renewable sources, up from just under 7 percent thirteen years ago. That is no small feat. Germany is a manufacturing powerhouse: It's the world's fifth largest economy and third largest exporter.

The world faces rising risks from fossil fuels. Yet, they are expected to remain the dominant energy source globally, supported by subsidies of more than $523 billion, according to the latest IEA World Energy Outlook . Demand for these finite resources continues to grow -- likely by one-third by 2035 -- and harvesting them is in many cases growing more complicated and expensive. Fossil fuels are the leading driver of climate change, which is bringing increasing threats to people, businesses and economies.

Germany's success points the way to a very different future. The country's energy transformation can be traced back to 1991, with its first feed-in-tariff -- a policy that supports renewable energy investment by offering long-term contracts to energy producers. In 2000, Germany expanded this policy into the more comprehensive Renewable Energy Act . For homeowners, farmers and businesses, this policy meant that they could invest in a wind turbine or buy solar panels confident that they would get a steady return on their investment.

In 2011, following the Fukushima disaster, Germany's government and opposition parties agreed to expedite the transformation. Germany today is well on track to meet its renewable targets: at least 35 percent share of gross electricity consumption by 2020, 50 percent by 2030, and 80 percent by 2050. Germany also has targets for increased energy efficiency and reducing greenhouse gas emissions.

Just as the economic sky has not fallen, neither has the country experienced the dreaded electricity blackouts that some feared. In fact, Germany continues to have the most reliable power supply in Europe -- and far fewer electricity interruptionsthan the United States .

Of course, this economy-wide transition has had some hiccups along the way. For instance, even as Germany has built a very large market for new solar power, panel manufacturers' margins have been squeezed by competition and some have had to go out of business.

Germany’s experiences provide valuable lessons and insights, including for U.S. policymakers states. Three principles stand out:

First, Germany has a national vision and commitment to renewable energy. Over the past decade, Germany's political leaders -- backed by strong popular support -- have made renewable generation the cornerstone of its energy future. Successive governments have used stable and long-term policies to turn this into a reality. This has created an atmosphere in which renewable energy investment is considered a safe choice, not a risky one.

Second, Germany's policies are consistent, but still flexible. The government has set targets; policies are adjusted as markets develop and technologies evolve. For example, while Germany has maintained its feed-in tariff for two decades, it has gradually adjusted the rate as necessary to track falling costs. Support rates for solar photovoltaic (PV) projects are now adjusted every month. For small rooftop solar installations, the rate today is 58 percent below where it stood five years ago, saving money and pointing a way towards competitiveness with fossil fuels.

Third, Germany is showing that transforming the electricity system can be done economically and affordably. Despite economic uncertainty around the globe, Germany's economy remains strong. The shift to renewables requires upfront investments, but these investments will have payoffs. By 2015, the cost of electricity from a system consisting of wind and solar PV, with backup storage, is expected to be about the same as that of natural gas and coal. From that point on, power customers will save significant amounts of money, as renewable energy costs continue to fall and those of fossil fuels rise.

Of course, Germany isn't the only country transitioning to renewable energy. At least 118 countries have renewable energy targets, and 65 offer preworldictable feed-in tariffs. About half of new electric capacity worldwide in 2011 came from renewable sources.

The United States stands in sharp contrast with this picture. It's true that 29 states currently have renewable energy policies, but the country lacks a national energy policy framework and corresponding targets.

For U.S. policymakers looking to expedite a clean energy transition, the Energiewende should be a welcome addition to the conversation. It's economically and ecologically responsible, and it's proven to be politically popular. It's certainly worth taking a closer look.

Baake is director of Agora Energiewende and former State Secretary in Germany’s Ministry of the Environment, where he led the drafting of the Renewable Energy Act. Morgan is director of the Climate and Energy Program at World Resources Institute.

Analysis and commentary on The Grid are the views of the author and don't necessarily reflect the views of Bloomberg News.